Corn market expected to hover around $4

By Jason Sagebiel, FCStone | December 31, 2014

The corn market has been on a bull run since the low was posted at the end of September. Corn consumptive end users were experiencing profitable margins but the reallocation of commodity prices has seen forward profitability decrease. The end result may limit upside opportunities of corn. Other factors influencing corn have been China’s acceptance of GMO feed grains/oilseeds and political and economic issues impacting Eastern Europe. Furthermore, rapidly declining energy prices could limit upside potential for corn.

The December supply and demand report didn’t offer surprises. The USDA left corn acreage and yield unchanged.  Thus total supply was steady at 15.668 billion bushels. Usage was relatively unchanged except there was an increase of 10 million to the food, seed and industrial sector excluding ethanol. Ultimately carry-out fell just under the 2 billion bushel mark.  Corn usage for ethanol was left unchanged at 5.15 billion bushels versus 5.134 billion bushels a year ago. World corn carryout increased by 0.7 mmt to 192.20 mmt. This compares to 172.84 mmt a year ago and 137.80 mmt in 2012/’13. 

Traders will be looking for anticipation of changes to acreage and yield in the January USDA report. Leading up to that report be ready for some choppy and volatile trades. The managed money has increased length into the fourth quarter and positioning may be critical to the market after the New Year. But there is a legitimate fundamental to support downside pressure, the cash market. Robust demand and slow producer movement may limit downside opportunities. Traders expect this market to stay on either side of $4.

March futures          
Date High Low Close    
December 19, 2014 4.11 1/4 4.05 4.10 1/2  
November 24, 2014 3.85 3/4 3.78 1/4 3.80 1/4  
December 19, 2013 4.31 4.24 1/4 4.30 1/2